The primary purpose of this blog (Prithviraj Kothari - MD, RSBL | Bullion market blog) is to educate the masses of the current happenings in the Bullion world.
This blog contains my opinion, which is not to be construed as investment advices.
Information provided in these blogs is intended solely for informative purposes and is obtained from sources believed to be reliable

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Saturday, 26 September 2015

GOLD DIRECTIONLESS: RSBL

Most of the global asset markets were quite unpredictable this week. Be it
equities, precious metals, bond yields or oil- they moved up and down following
last week’s FOMC meet.

Coming to gold, it neared its second
weekly gain on Friday afternoon, touching $1145 per ounce but plunged back following new comments on US interest rates from Fed chair
Janet Yellen.

Increased risk sentiment helped gold prices to end Friday’s
session modestly lower with prices settling at $1,145.60 an ounce; however, the
yellow metal has managed to end the week in positive territory, up 0.6% - its
second consecutive weekly gain.

Spot gold was last at a high of $1,144.80/1,145
per ounce. Prior to a speech from Federal Reserve chair Janet Yellen in which
she said the Fed has not ruled out the start of policy normalization before
2016, gold had been trading at two-month highs.

The gold
price surged to its highest since August 25 during Thursday afternoon sessions
as the yellow metal took advantage of a slump in the US dollar.

On Friday afternoon, gold moved back
from Thursday’s gains, after the release of positive US data and talk that the
country’s central bank will increase interest rates by the end of the year.

A slowing global economic activity
and excessively low inflation had delayed the Fed’s decision to hike interest
rates. Its decision had raised concerns about the economic stability of the US,
China and rest of the world and resulted in lifting of the dollar.

There are expectations in the market
that the FOMC is likely to raise the federal fund rates in December as they witnessed
a likely upwards revision to US-second quarter GDP growth

Gold declined on Friday morning
after Federal Reserve chairwoman Janet Yellen expressed optimism that the US
economy would warrant an increase in interest rates before the end of this
year.

She stated that it will be appropriate
to raise rates in 2015. Now there are around 13 weeks let in 2015 and two more
FOMC meetings are lime up in October and December each, which means there are
just two opportunities left to raise interest rates.

Federal Reserve Chair Janet Yellen has spoken, and an interest rate hike
remains on the table for 2015, but one trend watcher says the central bank is
just talking ‘really tough.’

Moreover, Yellen noted that ‘idiosyncrasies’ like lower oil prices and
weaker overseas economies have delayed the Fed from pulling the trigger.

Yellen said FOMC officials “expect that the various headwinds to economic
growth will continue to fade, thereby boosting the economy's underlying
strength.”

Yellen’s bullish sentiment was buoyed
through the third revision to second-quarter US GDP growth to 3.9 percent from
3.7 percent. The final GDP price index quarter-over-quarter was in line with
forecasts at 2.1 percent.

Yellen and her colleagues at the Federal
Open Market Committee (FOMC) have maintained interest rate at near-zero levels
since December 2008.

Persistently low inflation, emerging
global slowdown and an uneven recovery remain obstacles for the FOMC members to
normalizing monetary policy.

Though the yellow metal is still showing encouraging signs, but in event of
a rate hike, the impact on gold would be bad.

Currently old is searching for a direction as the FOMC has left the market wandering.
The picture will get clearer by the end of the year or maybe early 2016.

Currently one need to follow the FOMC religiously as gold’s whereabouts depends
on the Fed’s directions.

The
primary purpose of this article by Mr. Prithviraj Kothari is to educate
the masses of the current happenings in the Bullion world.